Facebook co-founder gives up US citizenship

The decision by Eduardo Saverin before the IPO is seen as a move to limit his tax liabilities.

By MSN Money Partner May 11, 2012 1:34PM

By Danielle Kucera, Sanat Vallikappen and Christine Harper

 

Eduardo Saverin, the billionaire co- founder of Facebook, renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.

 

Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin's stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. His holdings aren't listed in Facebook's regulatory filings. Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stand to reap billions of dollars after the world's largest social network holds its IPO.

 

"Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time," said Tom Goodman, a spokesman for Saverin, in an e-mailed statement.

 

Saverin's name is on a list of people who chose to renounce citizenship as of April 30, published by the Internal Revenue Service. Saverin renounced his U.S. citizenship "around September" of last year, according to his spokesman.

 

Singapore doesn't have a capital gains tax. It does tax income earned in that nation, as well as "certain foreign-sourced income," according to a government website on tax policies there.

 

Post continues below.

 

 

Exit tax
Saverin won't escape all U.S. taxes. Americans who give up their citizenship owe what is effectively an exit tax on the capital gains from their stock holdings, even if they don't sell the shares, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan's law school. For tax purposes, the IRS treats the stock as if it has been sold.

 

Renouncing your citizenship well in advance of an IPO is "a very smart idea," from a tax standpoint, said Avi-Yonah. "Once it's public you can't fool around with the value."

 

Saverin previously scuffled with Zuckerberg, his Harvard University classmate, over his ownership in Facebook. Saverin sued him and settled for an undisclosed amount.

 

The 2010 movie "The Social Network" added to Saverin's fame after it portrayed him as a scorned friend who provided the company's early financing and then was squeezed out. In the film, written by Aaron Sorkin, Saverin was portrayed by Andrew Garfield, who will play Spider-Man in "The Amazing Spider- Man."

 

Saverin's investments
Saverin moved to the U.S. in 1992, and became a citizen in 1998, his spokesman said. He has invested in Asian, U.S. and European companies, according to his spokesman.

 

He plans to invest in Brazilian and in other global companies that have strong interests in entering the Asian markets. "Accordingly, it made the most sense for him to use Singapore as a home base," Goodman said in the statement.

 

His U.S. holdings include Jumio Inc., an online payments company, and ShopSavvy Inc., a price-comparison service.

 

Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records.

 

Income-tax rates for top U.S. earners will rise to 39.6 percent from 35 percent next year, and rates on capital gains and dividends also are scheduled to rise unless Congress blocks the increases.

 

'Tax cost'
"It's a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice," said Richard Weisman, an attorney at Baker & McKenzie in Hong Kong. "The tax cost, complexity and the traps for the unwary are among the considerations."

 

Some of the world's largest wealth-management firms have ramped up efforts to fight tax evasion ahead of Washington's implementation of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings Plc, Deutsche Bank AG, Bank of Singapore Ltd. and DBS Group Holdings Ltd. all say they have turned away business.

 

The 2010 law, to be phased in starting Jan. 1, 2013, requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients. That means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which may depress banks' returns.

 

Facebook plans to price its IPO on May 17, offering 337.4 million shares at $28 to $35 each. The shares will be listed on the Nasdaq Stock Market under the symbol FB. Morgan Stanley (MS), JPMorgan Chase (JPM) and Goldman Sachs (GS) are leading the sale.

 

To contact the reporters on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net Sanat Vallikappen in Singapore at vallikappen@bloomberg.net Christine Harper in New York at charper@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net

Tags: Facebook
404Comments
May 12, 2012 3:49PM
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Just another neo-colonialist showing his true colors. Come here and take take take. His wealth came from us now he plans to high tail it. Never let him come back. Our public universities not just Harvard are selling us out. UC Berkeley got funding for a $470 million sports stadium for their losing football team by using the promise of raising tuition and letting in more out of state and country students as collateral. We won't need and actually don't need the H1B visa program if we spend our educational resources on our own citizens.

May 12, 2012 3:48PM
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Corporate American and the principals who own companies keep doing this and that their own high end performers like "dogs".  This corporate america today! The US government, IRS, and the other govt entities should come hard on these thieves who steel from our own economy. and denying jobs and opportunities for american people in the long run. 
May 12, 2012 3:46PM
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Hey U.S. Government, what is a Billion dollars times 0%?  In case you went to an American public educational institution that equals $0!!  Wake up!! We live in a global society in which people can move, or at least move their assests.  We need to lead the world in innovation and growth.  We won't get there by demonizing and persecuting those who succeed. 

 

Let's stop class warfare and envy against those who do well.  Let's give them a reason to stay and invest here.  This guy is looking around the world to invest his money.  We are competing with the world and holding a losing hand.

May 12, 2012 3:45PM
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It never ceases to amaze me how the lazy and jealous can tell the rest of us what we should be doing with our money. The libs have done a great job pushing this class warfare. problem is it will bite them in the butt
May 12, 2012 3:42PM
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It never ceases to amaze me how the lazy and jealous that demand everyone do more than thier part EXCEPT them
May 12, 2012 3:26PM
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For those of you that are bad mouthing this guy I have a couple of questions.  Have you ever used a deduction when filling income tax?  If so you have done the same thing this guy is doing.  You have limited the tax you owe by using a legal tax reduction.  The next question is why do any of you think you have a right to this guys money?  He earned it.  It is not the governments money, (the government has no money), and it is not your money. The idea that someone with more then you should pay more then you only makes sense to those on the receiving end and a few ultra rich who live in fantasy land.

 

Our country is broke.  The current tax levels don't provide enough money to pay the interest due on our debts.  None of the last 4 administrations have done anything to solve this problem.  They have all added to the problem by spending more then they take in.  The largest portion of our governemts spending goes to social programs.  There needs to be severe cuts in government spending to balance our budget but if we don't then the gravy train will grind to a stop and the last great depression will seem like the good old days.

 

I personally would not give up my citizenship.  I think the United States is the best nation on the planet.  I also think that rational, conservative thinking will one day again hold sway and the entitlest mentality will be seen as a low spot in history.

May 12, 2012 2:59PM
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It seems that everyone wants good national roadways and bridges, efficient garbage removal and water supplies, alert federal air traffic controllers, et al, BUT nobody is eager to pay for it. Sad reality.
May 12, 2012 2:51PM
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God bless him for escaping the extortion racket commonly known as the United States Government!
May 12, 2012 2:50PM
May 12, 2012 2:48PM
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I love the way that some people say over 40% of people don't pay income tax. Maybe it is because they have no income so kind a hard to pay income tax.  And this guy who has made billions, they say way to go good for him. So complain about people with no income not paying income tax and stand up for guy with money not paying what he should.   

May 12, 2012 2:43PM
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I don't blame him at all. Too many people act like he is un-American or something. Oh yea, he is from Brazil! Oh yea, he has lived in Singapore for years. But you think oh yea, he's rich! He should pay his fair share. He does pay taxes and will continue to pay some taxes. He just wants to protect paying more than he has to like every one else. Considering he uses no services of the U.S., does not live here and was not raised here. Why should he have to pay more than he has to. Especially when almost 40% of citizens pay $0.00. How many of you lie on your taxes, try to find every deduction you can, avoid paying anything you can, and you live here and use all the advantages we have here that the government pays for.

May 12, 2012 2:42PM
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Granted, I'm a Republican and am all for fewer taxes, but when you make your money as an American citizen, the ethical thing to do is to pay your fair share of taxes.  I disagree with his decision.  I think it's sleazy and unethical.  He should step up since it was this country that allowed him to make that much money to begin with.  I don't mean he has to overpay like Warren Buffet suggests though.
May 12, 2012 2:41PM
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GREAT, i plan to renounce also within 6 years. I getting tired supporting people who do not want to work. I also getting tired of these idiot politicians trying to take over my life!
May 12, 2012 2:39PM
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that is sick USA  not just money
he should

May 12, 2012 2:38PM
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Worth Billion$ and foreign citizenship. Priceless! As a retiree living with residency in a foreign country, no Million$ or Billion$ sorry to say. Will keep my U.S. citizenship as I paid a helluva steep price for it. It costs $450 to renounce it and then you have to apply for a pesky ole visa to visit the U.S. Once renounced  U.S.citizenship can NOT be regained, or so the Embassy says. At least most, but not all countries will not extradite you for tax evasion. if you hold their citizenship. Singapore is picky on granting citizenship, unlike the U.S.
May 12, 2012 2:37PM
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He was born in Brazil and lives in Singapore. Why should he pay US taxes? Wake up America, you're not competitive anymore. 
May 12, 2012 2:33PM
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Well, that is what it is going to come to if the liberals don't find another way to pay their own debts.  They spend, spend, spend and then want the "greedy rich" to pay their bills.  How is it fair to be prosperous just to have the government take it from you and hand it over to the bums?  I have no problem with people in need.  I have a huge problem with the bums who sit on their asses and get everything for free off the backs of the working men and women.  Baring teeth  I am getting more fed up with the liberals every day. 
May 12, 2012 2:29PM
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typical of the super rich... they never have enough and never think they owe...he came here exploited the benefits of this countrys legal system and economy and now is running away from his debt  

lfinc55

May 12, 2012 2:17PM
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suck the money out of this country and then give up your citizenship to avoid paying taxes, what a friggin low life coward.
May 12, 2012 2:09PM
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Kick his **** out of this country if he returns put him in jail for tax evasion ala al capone.

what a sick bastard he value's his money more than he does his country of which he made that money in.

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